In a recent interview on the “What Bitcoin Did” YouTube channel, macroeconomic expert Luke Gromen presented a bold idea for addressing the current inflation crisis in the United States. Gromen proposed that the next US president could use Bitcoin to back long-term Treasuries, offering a novel approach to stabilize the economy and combat soaring inflation rates.

Gromen’s Vision for Inflation Control

Gromen’s proposal involves issuing long-term US Treasuries with low yields but including a Bitcoin component as an incentive for investors. The plan, as outlined by Gromen, would involve issuing $5 trillion in 30-year Treasuries at a 2.5% yield, with each bond featuring a Bitcoin kicker. This would mean that alongside traditional interest payments, investors would receive a stake in Bitcoin, potentially attracting significant interest even at low yields.

In Gromen’s view, this approach would eliminate the traditional credit risk associated with government securities, as Bitcoin would serve as a hedge against inflation. By anchoring long-term Treasuries with Bitcoin, the government could effectively manage inflation risk and provide a stable investment vehicle.

Impact on Interest Rates and Capital Costs

The stability of interest rates is crucial for big businesses, which rely on these rates to determine the cost of capital. Gromen argues that by stabilizing long-term interest rates through Bitcoin-backed Treasuries, businesses could better plan for future investments. The predictability of capital costs would enable companies to compete more effectively and enhance productivity.

Gromen highlights that fluctuating interest rates can force businesses to adjust their prices frequently to account for changing borrowing costs. A stable interest rate environment would mitigate this issue, allowing for more strategic planning and pricing stability.

Broader Economic Implications

According to Gromen, the current economic policies have been heavily influenced by Wall Street, with a focus on short-term financial markets rather than the broader economy. He argues that for long-term economic stability and growth, it is essential to have a well-understood and stable cost of capital. Gromen believes that integrating Bitcoin into Treasuries could provide the necessary stability and clarity for both businesses and the broader economy.

By addressing inflation through this innovative method, Gromen suggests that the next president could help stabilize prices for goods and services. This approach could also potentially shift the policy discussion from Wall Street’s short-term focus to a more comprehensive view of long-term economic health.

Current Bitcoin Market

At the time of writing, Bitcoin is trading at $66,289. The cryptocurrency’s current valuation reflects its ongoing role as a potential hedge against inflation and economic instability. Gromen’s proposal to back Treasuries with Bitcoin highlights the growing intersection between traditional finance and the digital currency world.

Conclusion

Luke Gromen’s suggestion to use Bitcoin as a backing for long-term Treasuries represents a groundbreaking approach to managing inflation and stabilizing the economy. By providing a stable cost of capital through Bitcoin-backed securities, the next US president could address key economic challenges and foster a more predictable financial environment for businesses. As the cryptocurrency market continues to evolve, such innovative proposals could play a significant role in shaping future economic policies and financial strategies.